Singapore and Hong Kong have long been two important financial centers in Asia, and now they seem to have found their respective development directions, with Hong Kong increasingly relying on the mainland market, while Singapore hopes to become the gateway to Asia.
As a financial center, Singapore's history is actually not very long. Originally a British colony, Singapore gained independence in 1959 and joined the Federation of Malaysia in 1963, only to exit two years later and become a truly independent nation.
However, this does not hinder the success of Singapore's financial market.
This year, in the Global Financial Centers Index compiled by the Z/Yen Group for the City of London Corporation, Singapore ranked fourth globally, following London, New York, and Hong Kong. According to data from FinanceConnectSingapore.com, Singapore currently has 218 insurance companies/brokerage firms, 162 banks, 118 asset management companies, 69 financial advisory firms, and 47 futures brokers.
In the "Doing Business 2010" report jointly published by the World Bank, International Finance Corporation, and Palgrave Macmillan, Singapore once again ranked first overall, becoming the easiest country and region in the world to conduct business. The report primarily evaluates regulatory rules concerning ten stages of the business lifecycle, including: starting a business, obtaining building permits, hiring employees, registering property, getting credit, protecting investors, paying taxes, engaging in WorldWay, enforcing contracts, and closing a business.
Relying on the Asia-Pacific market
Unlike London and New York, which rely on strong national power to become global financial centers, Singapore has a land area of only 699.4 square kilometers and a population of about 3.6 million, with a total population of around 4.8 million including non-residents (according to mid-2008 data from the Singapore government), making it a true city-state.
In this context, relying on surrounding markets for success, Singapore has a unique geographical advantage. Located at the southern tip of the Malay Peninsula, Singapore is strategically positioned to radiate to the Southeast Asian market with a population of 560 million, and the entire Asian market of 3.2 billion people is within a seven-hour flight from Singapore, which is a key factor in its success.
Singapore hopes to expand this advantage. The Monetary Authority of Singapore positions Singapore as an international financial center as a "gateway to explore opportunities in Asia and beyond."
As of the end of January 2010, the Singapore Exchange had a total of 774 listed companies with a total market capitalization of SGD 650 billion, of which about 40% are companies based outside of Singapore. The Singapore Exchange (SGX) was established in December 1999 through the merger of the former Stock Exchange of Singapore (SES) and the former Singapore International Monetary Exchange (SIMEX). On November 23, 2000, the Singapore Exchange became the first exchange in the Asia-Pacific region to be listed through an initial public offering and private placement. The Singapore Securities Exchange is also the first fully electronic and floorless securities exchange in Asia. Due to the developed manufacturing sector in Singapore, manufacturing companies account for the largest share among local listed companies, and because local investors are familiar with the manufacturing sector, overseas manufacturing enterprises are more willing to choose Singapore as a listing location.
Financial derivatives are also a significant reason for the success of the Singapore Exchange, with about a quarter of the exchange's revenue coming from derivatives trading. The derivatives contracts traded on the exchange are diverse, including futures and options on Euro-Yen LIBOR, Euro-Yen TIBOR, Japanese government bond options, Nikkei 225 index futures and options, MSCI Hong Kong index futures, and FTSE Xinhua China 50 index contracts, among others.
Advantageous Market
The true advantage of Singapore's financial market lies in asset management, foreign exchange trading, and the commodities market.
According to the "2008 Singapore Asset Management Industry Survey" report released by the Monetary Authority of Singapore in June 2009, the total assets reached USD 11.73 trillion in 2007, but due to the financial crisis, this figure dropped to USD 864 billion in 2008. With the recent recovery of the global financial market, Singapore's asset management industry has begun to grow again.
Singapore is the fifth largest and the second largest foreign exchange market in Asia. The size of the Asian Dollar Market (ADM) in Singapore was only USD 30 million at its inception, but by 2008, the market size had approached USD 1 trillion.
At the same time, Singapore is also a global center for commodities and derivatives trading, with over 230 WorldWayrs operating in Singapore, holding an 8% share of the global over-the-counter commodities trading market.
Export-dependent local economy
In early 2009, to combat the global economic crisis, Singapore launched a series of economic stimulus policies, such as protecting jobs, encouraging banks to increase credit, enhancing corporate competitiveness, increasing infrastructure construction, and measures by the Monetary Authority of Singapore to prevent the appreciation of the Singapore dollar against a basket of currencies.
The government's stimulative economic policies and the recovery of the global economy have led to a resurgence in Singapore's economy, with the GDP growth rate reaching 13.1% in the first quarter. However, due to the small domestic market, exports have a significant impact on the economy itself.
